Briefs: Big deals in US during 4Q21; Host buys in Austin, sells in Boston  

Big deals in US pop during 4Q21: Sales of large hotels in the U.S. improved dramatically to US$9.2 billion in the fourth quarter of 2021 (the second highest quarter on record) with volume surpassing pre-pandemic levels, according to Real Estate Alert’s Deal Database. Last year, US$21.5 billion of hotels worth at least US$25 million changed hands, up 265% from 2020. Hodges Ward Elliott was the most active broker with US$5.19 billion in sales, more than quadrupling its 2020 total with a 27.8% market share, up from 26.3%. CBRE was second with US$3.97 billion, up fivefold for the year. Its market share grew to 21.3%. Eastdil Secured brokered US$3.49 billion of trades, also a fivefold annual increase.

Kimpton Hotel Van Zandt in Austin, Texas

Host buys in Austin, sells in Boston: Host Hotels & Resorts has acquired for US$246 million the Kimpton Hotel Van Zandt, a 319-room luxury lifestyle hotel in Austin, Texas. The price includes the hotel’s US$4 million FF&E reserve. The net acquisition price of approximately US$242 million represents a 13.2x multiple on 2019 EBITDA and stabilization is expected in the 2025-2027 timeframe at approximately 10-12x EBITDA. Host funded the deal with approximately US$140 million in proceeds from recent dispositions, and it assumed approximately US$101.5 million of existing secured debt. The debt matures in 2027, and the interest rate is fixed at 4.67%. Host has also sold the 1,220-room Sheraton Boston for approximately US$233 million. The sale price represents a 14.2x EBITDA multiple on 2019 EBITDA, which includes approximately US$135 million of estimated foregone capital expenditures over the next five years. In connection with the sale, Host is providing a US$163 million bridge loan to the purchaser. Since the beginning of 2021, we have invested $1.6 billion in early-cycle acquisitions. Since the beginning of 2021, Host has invested US$1.6 billion in early-cycle acquisitions.

New Castle acquires Holiday Inn Resort: New Castle Hotels & Resorts, Ridgefield, Connecticut, has acquired the 158-key full-service, oceanfront Holiday Inn Resort Jekyll Island for US$41 million. Previously owned by Georgia Coast Holdings, the hotel’s sale is subject to a land lease with Jekyll Island Authority, the state of Georgia’s managing entity. The total cost of the project, including planned improvements, is US$48 million or US$304,000 per room. Rich Lillis of Colliers arranged the deal as agent to New Castle.

Global hotel investment overview: Global hotel investment volume skyrocketed 131% YOY to US$66.8 billion in 2021, with the U.S. leading with 60% of the global volume, according to the annual Hotel Investment Outlook by JLL’s Hotels and Hospitality Group. Luxury/resort/leisure assets performed the best, increasing 17% over 2019 levels. There was a large influx of private equity to the hotel investment space, accounting for 50% of all transaction activity. Investors are shifting focus to certain markets that have augmented their profiles, like Miami which is emerging into a tech hub, the Maldives at a key leisure gateway destination and Berlin as a strong global office market. The report revealed that impact investing is increasing and there is a growing trend of “hotelization” in commercial real estates. Disrupters to the traditional lodging models — co-living/alternative accommodations are accelerating globally.

U.S. profits reach 52% of pre-pandemic level: Gross operating profit for hotels in the U.S. reached 52% of the 2019 comparable, according to STR’s 2021 P&L data release. Strong holiday demand in November and December helped improve overall profitability levels, with December showing the year’s highest recovery index in each of the key metrics. In December, GOPPAR was US$46.98, TRevPAR was US$154.50, EBITDA PAR was US$29.76 and LPAR was US$56.30. In 2021, GOPPAR reached US$40.48, TRevPAR was US$124.36, EBITDA PAR was US$23.96 and LPAR was US$41.82. Profit margins stayed relatively strong throughout the year, remaining close to the pre-pandemic levels. Better margins mostly stemmed from decreased expenses, due to lesser demand and fewer groups and meetings, while lifts came from cuts in room service, increased online customer service and lower employment levels. However, labor costs, which was concerning even before the pandemic, will continue to add pressure to the bottom line.

Zoku debuts in Paris: Hybrid hotel brand Zoku has announced its launch in Paris within the Stream Building mixed-use program. Slated to finish completion by this summer, the eight-story building is being developed in co-promotion with Covivio and Hines France and co-investment by Covivio and Assurances du Credit Mutuel. Zoku and Covivio have signed a management contract for the hotel. Spanning 5,500 square meters, the hotel (on the sixth to eighth floor) will feature 109 loft rooms along with communal living and co-working spaces, including a bar, restaurant and event space.

U.S. performance improves: Hotel performance in the U.S. increased slightly from the last week and showed better comparisons against 2019, according to STR’s latest data through January 29.

  • Occupancy: 49.7% (-12.2%)
  • ADR: US$122.40 (-1.9%)
  • RevPAR: US$60.82 (-13.9%)

Among the Top 25 Markets, Norfolk/Virginia Beach registered the only occupancy increase (+2% to 46.6%) and the highest RevPAR gain (+15.2% to US$41.15) over 2019. San Francisco/San Mateo recorded the largest occupancy decrease from 2019 (-41.3% to 42.4%), while Miami saw the highest ADR increase over 2019 (+14.8% to US$273.88). The steepest RevPAR deficits were registered in San Francisco/San Mateo (-56.3% to US$69.29) and Atlanta (-55.5% to US$62.16).

PMZ Realty finances 2 Ohio hotels: PMZ Realty Capital has arranged financing for two properties in West Chester, Ohio. The US$18.4 million interest-only refinance loan with a life insurance company includes the 100-suite Residence Inn Cincinnati North/West Chester and 100-key Courtyard Cincinnati North at Union Centre hotels. Both the properties are located adjacent to each other. The deal has allowed the owner to cash out some of their proceeds with a rate below 4%.

Indigo Road to manage in Iowa: The Indigo Road Hospitality Group has assumed management of The Historic Park Inn Hotel in Mason City, Iowa. Details on a new restaurant and name are expected later this year. Originally part of a bigger property, The Historic Park Inn is the only remaining hotel designed by architect Frank Lloyd Wright. The original property, which has undergone major renovations in the past and a US$20 million preservation and restoration project by Wright on the Park, was restored to a 27-key hotel and events center in 2011. The hotel is currently leased by WOTP to HPI Partners, a division of the Stoney Creek chain.

Ascott, Riyad Capital form JV: The Ascott Ltd., CapitaLand Investment’s fully owned lodging business unit, has entered into a joint venture with Riyad Capital to establish a development venture worth US$150 million in committed equity to develop student lodging assets in the U.S. Ascott will manage The Student Accommodation Development Venture (SAVE) and hold a 20% stake in the joint venture, with Riyad Capital owning the remaining stake. When fully deployed, the venture will drive Ascott’s funds under management by US$375 million. SAVE’s first investment will be a 779-bed freehold asset in Lincoln, Nebraska, which will serve over 25,000 undergraduate and graduate students from the nearby University of Nebraska-Lincoln. Currently under construction, the asset is expected to be completed by August 2023. With this acquisition, Ascott has invested around US$648.9 million to build a portfolio of nine student accommodation assets.

GBTA urges consistency in COVID certificate validity: The Global Business Travel Association (GBTA) and its European partner organizations have urged the European Union and its member states for a coordinated approach to the validity period of the European Digital COVID Certificate. In a statement, the organizations commended the European Commission’s recently adopted person-based approach to permit travelers carrying a valid Digital COVID Certificate to travel freely within the EU without additional restrictions, along with the recommendation to establish a common 270-day validity for certificates. The approach highlights the confusion of travelers as some member states continue to enforce differing rules. Having a common set of rules will be crucial to the recovery of the European and global travel industry along with the economy as a whole. The successive lockdowns caused the global business travel industry to suffer a 52% decline in business travel and €662 billion (US$747.67 billion) in lost business travel spend, the statement added.